Posted
by
CmdrTaco
on Monday March 11, 2002 @01:20PM
from the something-slimey-going-on dept.

einer writes "Things look mighty bad for Loki employees. From this article it appears that some of them haven't seen a paycheck since late 2000. Perhaps the most telling part of the article is contained in a parenthetical near the bottom of the page: "A single employee is listed in creditor filings as being owed almost $350,000 in unpaid salary and in expenses the company incurred using the employee's credit card."" there's a lot of not-so-happy-stuff in this article.

Actually, Visa allows up to 12 months, but most issuers put 60 days in the contract to reduce their workload. But if it's enough money (and not reimbursed by a company like this) the employees may be able to file a claim directly through Visa.

Our company issues "Corporate" Amex cards to use for business expenses. Guess who American Express calls if the bill isn't paid?

The only thing these cards are good for is the company can issue electronic payments straight to Amex instead of reimburing the employee who then writes a check. This usually works out okay but last year the AP dept was majorly screwed up and 'lost' several of my expense reimbursement forms.

Amex was sending me collection notices and was telling me *I* was responsible for keeping the account paid on time. My credit report took a hit because of these late payments until I went and got them removed.

I had always thought a company card belonged to the *company* and that they would bear liability for payment (of course, unless the employee used it for personal charges). Apparently it doesn't work that way (at least at my company, anyone else have it work different?)

I had always thought a company card belonged to the *company* and that they would bear liability for payment...Apparently it doesn't work that way

When you got the card, you were probably asked to sign some paper. That paper was a contract. Did you read the contract? Did you keep a copy of it?

Always read what you sign. Also be willing to NOT sign it. You'd be impressed with what people ask you to sign. If they say things like "It's really meaningless" when you question something, then ask them to take out the 'meaningless' clause, and see what their reaction is.

If the contract you signed with Amex said that you were jointly (or singly) liable for your credit card, then you are the one on the hook. If it says that you are only responsible for misuse, then that's a diffferent issue.

It's also possible that the contract didn't hold you responsible, but Amex simply went after the easiest target -- but generally large companies like that tend to cover their ass with your hide.

Wow, I never thought about this scenario, I've been lucky enough to never be there. A lot of companies issue corporate American Express cards to their employees so they can charge company expenses such as airline tickets, small equipment and software, etc. The employee is supposed to then file an expense report and be reimbursed for those expenses. Regardless, the employee is responsible for paying the card balance.

In this case it sounds like the employee was royally screwed by this arrangement. It's also possible that they never got around to filing an expense report. A few years ago I worked with one guy who hadn't filed expense report for eight months and was owed a few thousand dollars; the company sent him a letter saying he had to file by the end of the year or they wouldn't reimburse him.

You can only file disputes if the charges are not legitimate. If I lose my card and it is used, that can be disputed. If I legitimately use my card for things and can't pay it back (for whatever reason), you're SOL. Otherwise, think about the consequences for the credit card companies!

Chances are probably not, but IANAL. Typically, when a company "uses" an employee credit card, the employ usually pays for the product or service with the expectations that the company will reimberse them.
I consider any I buy with my own money (credit card otherwise) my property until the company pays me the money, and the money is safely in my bank account (or cashed). Doing things this way, you never run into the problem of a company owing you money because until they pay up you own it, and you are just letting them use it while you work there.

Among the liabilities listed in the bankruptcy filing was a total of $560,412.65 in unpaid salary, of which it was claimed that $302,009.70 was owed to the Draekers in unpaid salary and unreimbursed expenses.

(A single employee is listed in creditor filings as being owed almost $350,000 in unpaid salary and in expenses the company incurred using the employee's credit card.)

hmmm, looking at the math, it appears that Scott Draeker is the "mystery employee". I kinda figured this would be the case when I was reading the threads. The founder of the company gives himself (and his wife) an exorbitant salary, and then claims that it is owed to him/them. All the posts are bemoaning the poor programmer out of $350,000; the article seems to say that some shady stuff was going on, and maybe we shouldn't be moaning for the programmers, but pointing questioning fingers towards draeker.

YOU are apparently the only person in this thread who clued into the suspicious fact that a normal employee does not run up $350,000 in unpaid salary and expenses - he/she can't afford to. My first thought when I saw this figure is "this is more than likely the upper management who ran the company into the ground, while soaking it of its cash, making one last greedy grab for more cash in the bankruptcy (or manufacturing a phony "debt" to offset the $$$ he looted from the company, which the bankruptcy trustee is going to try to recover for the legitimate creditors' benefit.)"

No, I have no specific information about Loki, and I have no idea whether this is actually the case. But it happens all the time in bankruptcy cases, so I would definitely be surprised if this huge sum is actually owed to a poor exploited code warrior . ..

as has been the somewhat sheeplike assumption of everyone in this thread other than you and me, apparently.

do you STOP working there and demand some money? In my opinion, about 1 month of not being paid would be the end. Anyone who works longer than that without pay is a sucker, and i have no remorse if they get taken to the cleaners.

You're missing out on the fact that these guys probably really believed in their mission of getting these games to the Linux desktop. They probably also legitimately believed it was a hard thing to do and so were willing to make some sacrifices toward that larger goal.

That goal may not have sustained you (or many folks) through a period of inactivity. Sure, you have to pay the rent and know when to draw the line, but it hardly seems kind/fair/legitimate to lambast someone for having vision and principles beyond making a buck.

That is the entire reason they failed! They didn't see how _to_ make a buck. They kept seeing past it and _ignoring_ that tiny little detail.

For one thing, Linux is a _small_ user base. On top of that, the majority of Linux users are not willing to _pay_ for software. That is the reason they use Linux. The whole "freedom of software" is just plain bullshit to many. They know it, and so do I. Which oddly explains how Loki, a proprietary company, can even attempt to market Linux to begin with. Then you get the free software believers who will not purchase Loki games based on principle. _They_ are the ones who have vision beyond making a buck. People like RMS.

All-in-all, Loki had no clear vision and their market was very fragmented and almost noexistant. The only people who would purchase their games are die-hard Linux users who could wait a few months and pay a higher price for the same game they could have had on Windows for a lower price. Then take out the people who believe in freedom and the people who want free (no-cost) software and you are left with _no_ market.

If you truly believe Loki had a chance, then you live in a fantasy world.

It also depends on the job market. If everyone else is laying people off, and I believe in what the company is doing, then why not show up and do what you enjoy instead of sitting around at home bored?

Really it depends on how much you enjoy the job and how much you can afford to be without pay. If I really enjoyed my job, and could afford to do so, I could be convinced to stay a month or two if I thought the company was about to turn around.

Of course during that month or two some portion of my time at the office would probably be spent actively seeking another job. Somehow I don't think your boss can get to irritated if you take the afternoon off for an interview if you haven't been paid in a month:). If you enjoy the job enough, it's better than sitting at home.

Frankly, it's the Open Source/Free Software mentality that did that. OSS coders already work for free (don't deny that Red Hat and many others make money on other people's work).

This is just more fallout that most of the dot-com companies already experienced. The world does not revolve around wishful thinking.

I will probably get moderated as flamebait because many/.'ers are still stuck in that euphoric state-of-mind. Many can still not accept that it's possible for people, who provide what/.'ers consider a good service, to fail.

Look at most start-ups and you see two types - the very young and the very rich.

How very 1999 of you. Personally, working at startups, I've seen a lot of a third group: the formerly rich-on-paper who work so much their kids don't recognize them at the holiday parties.

Startups tend to be a breeding place for workaholics. I'm all for spending as much time as I need to at work, but I've watched people literally destroy their families by working 90 hour weeks, then get laid off and have two weeks pay to show for it rather than the untold riches they'd been hoping for.

Cautionary tale, I suppose. I still like working for startups and I'd do it again, but you've got to remember to control the workplace environment rather than letting it control you.

do you STOP working there and demand some money? In my opinion, about 1 month of not being paid would be the end. Anyone who works longer than that without pay is a sucker, and i have no remorse if they get taken to the cleaners.

The thing is, if you can afford to take a $350,000 loss, you probably aren't working there for the money so much as for the fun of it and maybe the principle of it all.

You seem to forget that this was, at a point, an awesome company doing really cool shit. I worked for a month at my dotcom without pay (except in loot, which wasn't adequate for the pay), but after that we dissolved and went our separate ways.

But I'd've never let 350,000 build up in debt, much less on a credit card I was responsible for.

I work for a big, blue company, and you can bet that the checks had better be VERY regular. Of course, they're a bit more well-heeled than just about everyone, but this isn't my hobby. It's a JOB. I enjoy it, but I sell my time to my employer so I can buy what I need to live.

Showing up to work even one day after having your paycheck not be there is crazy.

You stop working there and demand money the second time it happens to you. The first time I kept working, and wasn't paid for a couple of months. Luckily it was only salary and I didn't incur any expenses. In the end I was only out about $10,000. The lesson was worth at least that much.

Loyalty is all very well but you have to look out for yourself and your family.

Loki was a little different. For the most part, everyone WANTED to work there, and believed in the company. It's easy to believe promises and speculations when you trust the administration and have a sense of a common goal.

I think this mindset is typical of the dot-com fallout - people were so convinced that things had to get better that they stuck it out with companies that were obviously (at least from the outside) headed for the crash. I saw a lot of this at my old company.

I left my dot-com shortly after an enforced "voluntary" cut in pay when it became painfully obvious that management was too busy chasing VC to run the business -- and VC wasn't forthcoming.

Right after I got out of high school I had a job working as a janitor for a company that contracted to small businesses. After about three months, I had a paycheck bounce. Went to the company's bank and found that it wasn't an uncommon thing for this company to bounce checks. I immediately quit and demanded my back pay + the fee for bounced checks within 24 hours on the threat of turning the checks over to the DA. I got my money.

I think that if a company owes you back pay, you can go to the local authorities and secure company equipment as collateral. I'm sure what happened at Loki has to violate some labor laws.

I am with you on this one, my loyalty to a company stops with my paycheck. I once quit a job for this very reason. Once my pay stopped so did my work, when I was notified I would not get paid, I stood up , packed my desk, went to my managers cube and handed him my badge. I then filed a suit in small claims court, I got $500, which oddly enough they paid without a problem. This may not sound like much, but it was $500 more than everyone else got in the end. This may sound cold, but what company wouldn't lay me off based on financial reasons, they can do it to us, we are perfectly justified in doing it ourselves. Lets face it, a company that can't make its payrole, probably has deeper problems as well.

The company was still giving employees money, but they were calling it an "advance" and not taking out the withholding taxes. So it "seemed" like they were getting paid when, in fact, Loki was setting them up for a huge tax burden and scamming them.

In my opinion, about 1 month of not being paid would be the end. Anyone who works longer than that without pay is a sucker, and i have no remorse if they get taken to the cleaners

I reluctantly agree. I say "reluctantly" because I've been there. Not to the extent of not getting paid, but to the extent of working two jobs worth of hours for one tiny paycheck for a startup games company, in an environment that went from "Thanks for working all the hours! Big rewards soon!" through "I notice you didn't work this weekend. You realise how important this is to us, right?" to "Why the fuck did you take Sunday off? Don't you realise that we're fucked?".

It's true that the games industry is practically reliant on young guys with nothing to lose. The number of burnouts is amazing: in my current telecomms job, there are four ex-games programmers among the forty or so developers in my office, and we all excel as nine to five career guys, we just hit our late 20's and couldn't stand the pace of games development (and the hostile environment) any more. I've seen entire teams sacked en masse a day after going gold, and whole offices arriving on Monday to find a note on the door saying "This office is closed. Your P45's (severance tax notices) are in the post.", or guys get told that actually, it turns out that the company wasn't paying up their tax or benefits at source like they claimed for months or years. Worse, I've seen programmers leave in disgust at working with soulless backstabbing producers, only to have the producer follow them to the new job, sack them on a trumped up charge within a week, and (off the record) say "Go ahead, try and find the money to sue us."

What you have to remember is that games developers are basically venture capitalists. You invest a lot (time, money, your health) in the hope of getting huge rewards (the buzz of a game on the shelves, royalties/shares if you got the right contract). It's largely a lottery: when the company I was with started sinking, two of the original developers (both 100% dedicated and 100% fuckwits) walked away with $750,000 of paper shares between them. I walked away after my employer agreed to sell me (yes, as a commodity) to a publisher as part of a risible contract for a dying title. Last laugh to me though, those $750,000 worth of shares became more like $20,000 after the price bottomed, and those two guys had invested more than that in the company.

For every John Romero, spinning his way through life based on an early success, there's fifty young guys busting their nuts in the hope of emulating him and getting their own customised Ferrari. It's a tempting proposition.

What you must understand most of all though is that in a startup games developer, everyone is sincere. You're probably sitting next to the company owner, and he can usually thrash you at any deathmatch you mention. No matter how late you're in, he's there too. There's a real sense of cameraderie, and none of it is bullshit. It's only when the shit starts hitting the fan (usually after the company employs an accountant full time, I've noticed) that the cracks start to show, and your best buddy turns into the Pointy Haired Boss from Hell. But it's not like a switch gets flipped. You get abused by inches, and you have all those good early memories to keep you going. It's really easy to buy the line "Things will get better", for months and years, when the reality is that for most games companies, once they've burned their capital and burned out their programmers, there's plenty of younger outfits full of inexperienced optimists with money to burn waiting to pick up the slack.

When you're in the thick of it, and you feel like you're part of the company, it's easy to put things off (as long as you're able to continue to support yourself.) Often, the 'cause' is seen as worth the empty refrigerator. (Been there, done that.)

You've got to wonder how a person can keep working so long without a cashflow.

This same sort of thing happened at a company I used to work at where all of their projects were overdue, and they hadn't been financially prepared to be able to pay the programmers to finish. So the result was that each successive paycheck that was 'missed', fewer and fewer people came into work. Less and less got done -- they never did finish the products as far as I know. It was sorta sad in a way, and I hate for good companies (and good people) to be dragged down by money problems.

It was sorta sad in a way, and I hate for good companies (and good people) to be dragged down by money problems.

From the article:

Founded by California intellectual property lawyer Scott Draeker and incorporated in November 1998, at its height Loki offered 20 action and roleplaying games. But from the beginning, former employees say, something seemed amiss. Draeker, for instance, collected unemployment compensation in 1999 while also working for Loki. His wife, Kayt, was listed in corporate papers as the company's secretary.

Loki was on the financial rocks by December 2000, when a $26,000 payroll could not be met.

Things look mighty bad for Loki employees. From this article it appears that some of them haven't seen a paycheck since late 2000.

What the hell were they living on over
those many, many months? Credit? Or
were most of the Loki programmers borrowed
from the ranks of homeless shelters?

I just don't get this. I see that a
number were given advances in lieu of
regular payroll, but when the stated
figures of missing pay and expense
claims starts at $20k and tops out at
$350k, you just have to wonder how
compelling employment with Loki was
to those on the inside.

What's the alternative? I've been unemployed for over a year, a friend's been unemployed for over 18 months. This is despite a fairly vigorous attempt to find another job, but networking doesn't do jack when every single peer is unemployed, half the recruiters you've worked with in the past were laid off, etc.

At least working without pay is still a job. A lot of HR people are still old-school and convinced that we spend our days in leisure while unemployed, not putting in a full workweek developing our skills (e.g., learning Java) in addition to hunting for another job.

P.S., you live off of your savings and unemployment, then a second mortgage, then start hitting your 401(k). You take shitty temporary jobs, if you can find one. They guy behind the cash register may have much more programming experience than you.

only problem is that Loki's board of directors is as broke as its employees. A lawsuit would have very little effect, if any.

This never should have happened at all. Loki and its employees were obviously working under some promise of eventual financial gain, or they would not have been there. Which means that someone at the top was either "blinded by the open source light" or was lying through his teeth. It's shit like this that makes working for Microsoft seem like a good alternative.

I`ve heard nothing to suggest that working for Microsoft is anything other than good. Have there been some horror stories i`ve missed out on (whiny stock-racism complaints on behalf of temporary workers doesnt count)?

You make a really good point though. I can't figure out how it's legal in the US that management can walk away from a dead company with millions of dollars in their pockets, while the employees walk away thousands in the hole. Maybe the US should look to Canada and follow its lead (in just one of many places).

From what I understand the employees almost always get screwed in these situations because the way the creditors are paid off is the ones who are owed the most get their money first and then it works its way down. IMHO it should be exactly the other way around, FedEX can afford to lose $100,000, Joe Programmer probably can't afford to lose $20,000.

This should be a criminal action. If I steal from my employer they can file charges against me. If I steal enough, say a nice color copier or something, I could actually be charged with grand theft. The converse should also be true, if a company knowingly defrauds or financially harms its employees then the company should be criminally liable. It won't reset things for the employees, but at least nobody would have to be concerned with the particular executives mismanaging a company for 20-30 years.

Basically (and highly simplified), creditors are placed in various groups (no, amount owed isn't a criteria - other factors are). These groups are then paid off in a set priority. If you are a creditor with an unsecured debt, you're not getting much. Within the group, the money is usually distributed in a level manner - x percent per dollar owed.

Usually, everyone in bankruptcy gets screwed, especially chapter 9.

What the courts CAN do is examine past transactions from the company, and compel the reversal of those transactions.

I can't figure out how it's legal in the US that management can walk away from a dead company with millions of dollars in their pockets, while the employees walk away thousands in the hole

I agree that it shouldn't be legal for the executives to plunder a company. However, it's pretty simple to avoid being owed huge sums of money by your employer... DON'T WORK IF THEY'RE NOT PAYING YOU. It's simple, really.

While I'm usually pretty socialist in my views, this is a case where I don't think we need a specific law - just a little common sense.

I aslo came from Quebec. I was working for Sanga just before they stop paying their employee. I've not stayed long being upaid. However they still owe me 6K CAN.

At first we went to the "Office des Normes du Travail" and filled a complain, along the other Montreal employee. They was some legal proceeding going on. Up to the point were the Sanga employee in Ontario decided to file a class action suit. The "Office des normes du travail" decided to give control to the lawfirm that was suing for the ON employee.

I received many legal document telling me that thing were going well. Up to the point were the company filled for bankrupcy. At that point, the lawfirm (can't remember which one) decided it was not worth the trouble and drop the charges.

So did the Quebec laws protected me... Not at all, it just gave me the illusion of being protected for some time. Sure I can decide to sue, but it will cost me a lot more that what they owe me.

The point is that the law may be protecting you, but if the system fail to help you being protected, there is not point in having these laws.

I work for one reason, money. The second I don't get a paycheck, I'm out the door. I'm especially not giving a company that can't pay me, more of my money!

Don't think that this is a mercurial or bad way to think. What would your employer have to say if you reneged on your half of the employment agreement, and then you had the nerve to demand six months of living expenses?

Yeah, I'm having a hard time feeling bad for these Loki employees. In fact, I think they're pretty stupid.

It's one thing for your company to bounce a paycheck or two here or there and pay up the next week or month. If you're committed to the company, you stay. But to not have been payed for a year? How many weeks in a row does it take for you to realize you're never going to be paid? At some point the blame for this situation falls on the employees, who didn't have the guts to stand up and tell Loki to shove it.

It's not about the money, man. They were working for the power and the glory of Linux. If Microsoft didn't control the low-rent housing industry, they could have paid their rent with peer respect and bought their groceries with good will.

Yes, when your pay falls into arrears you have every right to walk out until they catch up.

However, in some circumstances it may make sense to stay. If you really believe that the company will catch up in the near future, then it can be reasonable to keep working for them to help them get into the black.

It would be interesting for someone to do a study on how many companies fall into that kind of trouble and later recover to become successful. Can you figure out at what point the risk surpasses the expected reward, in a struggling company? (Assuming to begin with that the company's business plan is viable)

But any way you slice it, six months is ridiculous. As many have been asking here, how did these people live?

"I work for one reason, money."

I work for money, too. But I certainly don't work for "one reason." Job satisfaction and a desire to improve myself rank up there as well.

During that period, however, the Draekers took almost $92,000 out of the company, according to court filings; in counter filings, Loki claimed that the funds went chiefly to pay employees, though it did note that Scott Draeker was paid $46,504 in salary during the period from January 15 to July 31, 2001, with Kayt Draeker receiving $18,643.52 during that time; the company paid medial insurance premiums for both during that period.

And it's this sort of thing, boys and girls, that causes me to never trust management. The real shame is that you've got employees who are going without their pay, ostensibly because of loyalty to the company, and then getting shafted in the end.

Moral of the story: When the company asks if they can stop paying you, don't agree to let them use your credit card.

Unless you're working for yourself, never EVER put company expenses of any kind on a personal credit card or check.

My company about two years ago drafted a new policy for expenses where the employee fronts the bill and the company reimburses the employee (thanks to some salesmen who apparently thought a couple thousand dollars worth of golf bills each qualified as a business expense). Shortly thereafter they expected us to start paying for our own hotel rooms when out on service trips, at which point i politely informed our COO that his options were to issue us company credit cards for expenses or service the out of town clients himself. He tried to give us some idle threats about hiring employees who would be more complacent. Thanks to the solidarity of our development/engineering team, he was faced with the prospect of hiring an entire development team and expecting them to maintain the monumental pace at which we'd been going in a two week period, while we all went to work for a competitor who had given us all standing offers.

I don't know what Draeker made for the rest of the year, but 46 thousand is not a lot of money, especially for the CEO of a software house. His wife was paid 18 thousand, which is less than my wife makes at Wal-Mart as a cashier.

I doubt your wife makes $36K a year as a Wal-Mart cashier. Note that the figures in question were for a 6.5 month period - January 15th 2001 to July 31st 3001. ~$128k per year for the Draekers seems more than fair under normal circumstances. When the employees are working for free, however, it's fucking bullshit. They took care of themselves and left everyone else to rot.

You can pretty much say goodbye to most (if not all) Linux ports in the future. Game companies will look at this and think, "If it didn't work for them, why would it work for us?", and not even bother putting a port out.

You can pretty much say goodbye to most (if not all) Linux ports in the future. Game companies will look at this and think, "If it didn't work for them, why would it work for us?"So you are saying that game companies will not release a Linux version or allow a game to be ported for fear some sleezeball lawyer (repeating myself) will suddenly start a company, steal what he can, then close up shop? Sorry, I can't follow theargument.

That's like saying nobody will ever walk into any building because some terrorist might fly an airplane into it.

Sorry, but I don't feel the sympathy for the no-more-ports-for-us crowd. People weren't buying them, there's loads of evidence to support that, and I don't know about you, but NOBODY that I know plays games on Linux. I'm sure some of you play games in linux.. but in every lan party I've been too, it's the domain of microsoft and directX. Even our fearless leaders *chuckle* make a mess in their shorts trying to get Diablo II installed as fast as they can.. in windows.

If someone wants to prove linux gaming is viable, write the next-biggest-thing in gaming and make it only available on linux. Make people NEED linux the way I NEED that URL at microsoft for the latest directX update to work, or the way you NEED a PSX2 for GT3, Metal Gear, or GTA3. No, TuxRacer is a sad joke. A native killer project is about the only thing that's going to make this happen - or out of the box DirectX emulation.

Linux isn't the best tool for gaming. When all you have is a hammer...

Makes me wonder if Loki's demise may possibily have been management related rather than completely market related. Although it might all boil down to missing the real size of demand from the Linux use base.

Jesus fucking christ. As cool as the project is, don't these people have any common sense? You don't get paid for a year, you jump ship. I'd be gone after 2 bounced [or not received] paychecks. The market is shitty, but I'm sure that someone could hire them. Of course management got paid, this was a friggin sweatshop.

Yeah, right. I don't know anyone who's working, and it's not for lack of trying. I don't recall where Loki is located, but in a lot of markets the only possibilities are an unpaid job or unemployment, and the former looks a lot better on the resume since a lot of people still think that this is a minor recession, not a 50+% unemployment depression with no end in sight.

I had always wanted to consider Loki one of the "good guy underdogs". A company to root for. I mean, c'mon. They helped bring Quake3 to Linux, how could you NOT like them? But then I read this:

Instead of sending them W-2 income tax forms, they were sent 1099s, meaning that they are left to pay taxes on income for which the company was already supposed to have -- but hadn't -- paid federal withholding.

The question here is, did Loki without the taxes/FICA, etc. out of the paychecks? If they withheld, didn't deposit it, and then sent out a 1099, then the company should immediately be investigated for tax evasion and any other criminal charges that are relavent. This is fraud, and the victims are the employees. If the taxes were NOT withheld, then this is a non-issue. Yes, it sucks having a large tax amount due all at one, but thats life.

Who wants to take bets that this gets publicized as FUD that Linux does not a viable company make?

Who wants to take bets that this gets publicized as FUD that Linux does not a viable company make?

I'm not really sure you should call this FUD, no matter how it's spun by the media. This is real life. There is no dishonest or biased journalist/advertiser who could make this story any worse. This is BAD FUCKING PRESS for the OSS development community, plain and simple. Sure, Microsoft will have a field day with this. A lot of other companies will as well...but that's what happens.

It's pretty well known at this point that in general, business models that are based around the development of Open Source software typically DO NOT SUCCEED (with very few notable exceptions). This is one very good example of that. The fact that the company's management only made the situation worse is just gravy for Microsoft and its kin. It makes the whole event look very, very evil, and that's how it SHOULD look.

So to summarize...it's only FUD if it's not true. This, unfortunately, is very true.

Um, except that Loki's main products were closed-source conventionally-licensed games. Yes, they did release some libraries (e.g. SDL, OpenAL) under GPL. But those were just a building blocks for their main business: selling conventional, commercial software in exchange for money.

If OSS somehow does get tainted by the Loki story, then it really is dishonest FUD. Loki never had (or claimed to have, that I know of) an Open Source revenue model.

I'm not an accountant but run my own business. Here's my understanding.

Loki can send a 1099 and say these guys were contractors, but the IRS may claim otherwise. If they were employees in 2000 then they most likely were employees in 2001. Loki should have paid 1/2 of the social security and medicare taxes.

If the 1099 status holds up these guys should be somewhat thankful. That will let them file a Schedule C and deduct their out-of-pocket expenses from income, although it sounds like they'll have to cough up taxes on the net after these expenses.

in the late 80s early 90s in the UK. the excuse was always that BACS (Bank Automated Clearing System) had "failed" - yeah, right. they would usually pay late - and usually a few days up to a couple weeks late, and often after some maintenance revenue came in, just coincidentally. one of our people took particular exception to this and checked her rights (this is late 80s UK remember) - apparently they could pay you up a month late and not get any flak for it legally. o'course it turned out that making waves about it got you put to the back of the queue next month, so no one ever did that twice. of course the irony of the thing was we were an accounting software company with BACS payroll modules - we knew exactly that BACS is like a rock, and so was the software...sympathies for those folks.

The key to not having your suppliers/employees leave at the first sign of trouble is having open accounting in your company. I'm run a small consulting firm - and had a cash crunch a few years ago, and *nobody* cared because all my books were open. Everything. Salary, expenses, capital items, AP, AR. Even contracts for all/upcoming jobs. Everything. If you looked at the books you could see that I just planned improperly - I ran out and got a personal loan, and all was well a month later.

The gratest thing about open books, is that you don't have to lie. And you can't fool yourself into thinking things are better than they are.

By being nothing but open and honest about why employees are paid the amount they are paid. Start with clearly defined roles and responsibilities then add clearly defined performance metrics. It's almost self managing because everyone has an idea of what everyone else is supposed to be doing to earn what they are earning.

By being nothing but open and honest about why employees are paid the amount they are paid.

Yep! Coulden't have said it better myself.

Anytime a company needs to keep salery levels hidden, it's beacuse someone in the company is getting screwed. The levels of pay tend to be flattened - I (the owner) don't make much more than average. But it's worth it.

I have a theory, that after a certain level of pay (say around $50K a year) - you happiness in life is determined not by money anymore, but by the choices you make. I make more that $50K - so I'm happy, and by me not cheating others, more people around my are happy.

So in short, open salery keeps jelousy down and trust up. And it has the added benifit of me (the owner) not screwing my friends.

Without naming names, I worked for a company that experienced a similar downfall; however, not as extreme. I was a college intern at the time and the company employeed about 70 people. At the time, the sky was the limit. The company had a great reputation for open communication with its employees and an excellent working environment. We had monthly status reports from the executives on how well the company was doing and then one day, they just said they had no money left. It came as a shock to everyone. They said they had enough money to keep everyone employed for 6 months and would not have to lay people off if we got new business. Since the company had such a great environment and the employees were really happy there, people started taking salary cuts and some voluntarily gave up their salaries. No more than 2 months after the bad news, the 6 months they promised turned out to be a lie. They laid off almost 30 people in one day. Since I was just an intern, I finished my semester and left. I had big eyes on working for this great company but got quite a reality shock instead. I am now happily employed for a competitor of my old employer and I still see a couple resumes from people who work there or used to work there come across my desk every month. I think the economic bubble we lived in taught everyone a big lesson and for me it was, don't ever trust your employer when things seem even the slightest bit wrong.

Linux gamers flocked to these forums pleading with people -- even non-gamers -- to buy something from Loki so they could stay afloat. Hopefully this will show that blind loyalty to a platform (Linux, Windows, who cares? They're all OSes, not religions) is sometimes misguided. If I would have temporarily dropped my who-cares-about-games-on-Linux stance and bought something from Loki, I'm guessing I would have only been supporting the allegedly crooked Draeker clan instead of supporting the company.

Sorry, but supporting a friggin' IP lawyer like Draeker isn't my idea of money well spent. The best we can hope for at this point is that the Draekers carry all of the guilt (if it's proven they're guilty) without dragging down Linux. I would think that's possible. The guy sounds like the s**t that s**t scrapes off its shoes. Folks who run companies and end up screwing the folks that made their business work deserve whatever hell that's dished out for them.

Ok, I've seen a few replies stating that Loki employees should have just left when they didn't get money and that they were stupid not to leave. I can't not reply to that kind of misinformed response.

Having talked with several employees that worked for Loki, I feel I can honestly say that several of them were terribly idealistic and sold on the idea that Linux had a bright future on the desktop. Not only that, but that Loki was at the forefront of capitalizing on that bright future and that happy days were just around the corner. For someone that has even a modicum of idealism and a love for Linux and the future of free software, this wasn't hard to believe. Just look at the timeline [linuxgames.com] and you can see that in the first year, things looked amazingly positive. Several games published. Quake 3 Arena in tin boxes. UT also being published (albeit not by Loki) just added more credence to the idea that Linux and the idea of Linux gaming were coming of age quickly.

As has been said before [linuxgames.com], Loki did several things correctly. That is, if a company has to appeal to the Linux community, then they should follow Loki's lead. Contacts in IRC and on newsgroups. Good tech support. The whole crazy LokiHack idea. They were all great ideas and pulled the community into the SDURF (Scott Draeker Un-Reality Field). If you have ever visited these forums where Lokiites could be found, you would have found out how enthusiastic everyone was about what was going on. These people believed and were willing to be poor but doing what they loved to make it happen.

Unfortunately, Loki seems to have been terribly mismanaged. It is unwise to go into details, but suffice to say that it could not sustain itself with the leadership that it had. Look at the timeline again, and you can see when people started to give up and leave for real paying employment. Look at the frequency of games after the beginning of 2000. Look at the SMAC debacle. Look at the crap that was released at the end (i.e. Postal Plus). Sadly, some gave up later than others, and suffered even more for that sacrifice.

Sometimes a dream means more than money or even family. In the case of Loki, it appears that those dreams were sold and exploited, hurting both the talented people that ported the games and provided the support and the people in the Linux community that bought the products. On a larger scale, the image of Linux has been tarnished as well, and it will make it even harder to move on from this fall.

Having worked for a company that died a long and painful death (a logistics and trucking company) it's remarkable when coming to terms with the end of a company you enjoyed working for, comiseration with fellow employees (many of whom remain close friends), and what you eventually find when on in the finance department.

The endgame, where questionable accounting practices and behaviour become clear, is perhaps a last, grim fascination, like watching a reckless driver plow into a schoolbus full of children, then rationalize it all away, and even go so far as to extend blame to the victims.

In our case, the VC's had been skimming millions off the top, each month, as they clamined the company was continuing to lose money and cut staff. Checks were kept in drawers until vendors refused to deliver freight in their care, until paid. Benefits vendors weren't paid, some were signed on with known problems meeting their own bills, because they were cheaper (no kidding.)

Watching round after round of layoffs and then ripple effect waves of departures of those who couldn't stand it any longer. And amazingly, the execs always seem to have a golden parachute contract and get away relatively unscathed.

I've told my employees that if I ever miss a paycheck, they should quit immediately, regardless of what I say at the time. I tell them not to believe me if I say it will get better. I've never seen things get better for a company once they stop being able to make payroll. I don't suppose that the visual effects business is any different than any other business in that respect. Once you start digging a hole it becomes increasingly impossible to ever get out of it.

The problem is, that once a company starts foundering, the founders often begin to lose touch with reality and start making promises that they can't keep -- whether or not they know that is not really an issue. The hole is not only financial (although that's a big enough hurdle on its own) but it's also bad will, that is, the accumulated acrimony festering within the company.

This happened to me at a company I worked for in Texas - it was a very, very small company I worked at right after college. At first they slipped a paycheck or two and then made it up... but after a while they slipped more and more and eventually they were four months behind on paychecks.

How do you survive? Credit cards, the debt from which it takes you years to get rid of.

Why do you stay? It's pretty easy to say (as many here have) "I'd be gone that month!" The reality is that sometimes you really like what you do and don't want to leave the situation. Sometimes you might not have very good options for leaving like if you just bought a house or were just finishing college there and would loose a bunch of credit by moving. Sometimes (especially starting out) your feelings are that you want to be a loyal employee and not abandon a company at the first sign of trouble (an easy feeling to have when your company is small enough that you know the owners well). Sometimes you are just young and inexperienced and don't really know when is a good time to leave.

When I left I moved out of state, and since I was leaving for good I demanded they give me full back pay - which they actually did cough up. My condolences to these employees that may not see anything from this at all. Good luck and I hope you have better luck with your future employers!

During at least part of the period when employee payrolls were not met, Loki sometimes gave employees "advances" on salary owed. Former employees say that these advances were in the amount of their net pay; the benefit to the company was that federal and state taxes on the payroll were not paid, because the money was treated as loans rather than pay.

If I were a Loki employee that received one of these "advances", I'd make plans to talk to a lawyer, because the screwing might not be over. If these payments were actually made with the understanding that they were loans against future salary payments, the bankruptcy court might view the amounts as monies owed to the company, and thus an asset of Loki. If so, the employees might be required to repay the full amount, and then file as creditors for the amount of their salary owed (Pay back $1, get back $0.10 if you're lucky.) I would think that a 1099 for the 2001 tax year for the amount of the advances received would be evidence that the advance amount had been forgiven, so the emplyees shouldn't have to worry about amounts advanced in 2001; however, the court might still consider any of these advances made in 2002 as loans. IANAL, but I would think it would be prudent to talk to one in this situation.

This isn't an idle concern. A while back a Ponzi scheme went under, and the person in charge of the bankruptcy demanded everyone who had received a check in the past 6 months (?) return the money.

That sounds good... until you realize that many of these checks were refunds on the original investment that were immediately reinvested. (The basic idea was that people would invest $1000 and get a post-dated check for $1200.) There was no allowance for that reinvestment, so an initial $1000 deposit could incur a demand for many times that.

The investors shouldn't count on getting back 100 cents on the dollar, but even getting zero cents back on the dollar is far better than losing an additional $3-10 on every dollar invested because the bankruptcy master is a moron. Or a greedy bastard, since her fee was a sizeable percentage of all money put back into the pool.

It was so bad that some investors committed suicide. And who could blame them - the bankruptcy master had sued them for their house, car, and all personal property to satisfy this "debt."

Bottom line: if you are owed back pay, you must insist that you receive a paycheck, not a loan.

But it doesn't surprise me. Some companies are slimy like that. Heck, it happened a couple of years ago to my wife.Fortunately for us, the IRS has pretty stringent rules on who is and is not a contractor. If it's called into question, there's 20 Guidelines [prounlimited.com] which the IRS uses to determine if a person is self-employed or an employee.

If you think you're an employee, but your employer dodges their own taxes by handing you a 1099, you can petition the IRS to look into it. Check out Form SS-8 [irs.gov].

I used to work for a technology consulting firm that worked solely with movie industry and law, with the board of directors made up of his lawyer frat brothers firm. Every year employees would go to Cannes in France or Sundance to work and help their clients from L.A. Well come mid-2000 something was obviously wrong with the company, the owner was quietly laying off people and reimbursement and pay checks would slowly come up late or show up the next pay period. Also, the owner who was once a happy, ambitious kind of guy, was getting bitter and quiet.

Regardless, some choose not to see the facts and kept on hoping things would get better and didnt want to loose their seniority they had built with the 3-5 years with this firm. Well Cannes was rolling around and some other festival thing in Italy as well. One my colleagues was asked to go and excitedly agreed. The owner, who always went, said he would meet him in Italy and then head off to France. Once there a per diem was renegged on, with owner citing that reimbursements would be made for any monies spent, since co-worker didnt believe it they decided to go cheap as possible. Checkout day and owner left a voicemail stating they had already started up to France and to meet there, not to worry about the hotel it was taken care of. As co-worker started to leave hotel security stopped them citing they needed to check out, co-worker thinking that just giving them room keys was not a big deal agreed. After getting to the counter the co-worker was told they needed to pay $7500.00 in hotel bills for 5 rooms, room service, and other amenities that the owner claimed was taken care of. Needless to say this co-worker did not have that kind of cash or credit limit on cards and ended up in an Italian jail. Luckily he had some family visiting in Sweden at the time and was able to get them to aid him in his time of need.

Upon returning he was able to get reimbursed after 30 days and immediately quit. And over 2000-2001 many lawsuits were brought against the owner and his company from employees, vendors, and IRS while he hid behind his corporate veil. Employees that were eventually never paid brought up lawsuits and went to the labor board. Problem is if someone is awarded a judgement it is the responsibility of the plaintiff to collect and of course this owner would not pay. So one has to go to court again and the cycle continues. Some could not handle legal costs and lawyers and dropped their cases, while others would have judges change their award from $2000.00 backpay to $17,000.00 for punishment. But again a futile effort if the business wouldnt pay $2000.00 why would they pay $17,000.00.

Ultimately the company folded, the company paid out some of the smaller judgements and settlements ignored the rest and folded. The owner losing his company and money decided to sue his clients! Some bigger studios and firms typically cost analyze a settlement and legal costs and he was able to make out with nice $50k checks here and there from larger multi million dollar firms/studios not wanting to be bothered, and with others that wanted to fight he would walk away. Rumor has it that this scum has now started some 3 non-profit organizations and is starting to do well financially again, learning that non-profits have protection against the IRS.

The programmers were in the 40-50k range. In Orange County. Which is not much above poverty, just for the record.

That is below poverty in Orange County. Can't imagine where you'd live for that kind of money in OC -- probably waaaayyy inland or some nasty place in Santa Ana. No groovy oceansides in Newport or cozy bungalows in Corona.

This is probably the best thing that COULD come from this. With bankruptcy floating over his head, the CEO has basically only one choice. File for bankruptcy, divide up the assets (which includes the code) to his creditors (employees) and hope he doesn't go to jail. If the employees have the code, they may be able to get another startup going. Linux software can be successful in the marketplace, but you need to be careful how to manage it. What were they buying for $350K??? Sounds like a lot of Aeron chairs and BMWs to me. Budget yourself well and your business can succeed.